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Editor's note: This article is written with consumers in mind and provide a script for advisors looking to explain the benefits of using split annuities to their clients.

Consider this: You have $100,000 today. You take some of it now and start enjoying it in small amounts for a few years. Over time, those small amounts add up and before you know it, you have spent a large chunk of your original $100,000.

What if, all the while, the money you weren’t spending was just sitting and gaining interest? What if that interest gained was equal to the amount you spent over the years? Then, when all is said and done, your $100,000 is still sitting pretty like it was never touched. Isn’t that almost like getting free money? Well, annuity experts can provide you with just that kind of magic money.

How this works

With proper planning, you can use what is known as a split annuity to create this “free money” scenario for yourself. A split annuity is the use of two different types of annuities working together at the same time. An immediate annuity and a deferred fixed annuity are the ingredients in this plan.

Immediate annuity

This annuity allows you to turn a lump sum into a monthly income stream for a guaranteed time period. The amount of cash you receive each month is determined by how much you are placing in the annuity and how long you plan to receive payments. At the signing of the contract, you know exactly how long you will receive payments and how much each payment will be.

This annuity keeps your money invested for a set amount of time and gains interest at a fixed rate for the length of the investment. The interest rate is set and locked at the signing of the contract. Once you reach the end of the investment period, you get back your original investment, plus interest. With these annuities, you also know at the signing of the contract exactly when your money will be returned to you and how much will be returned.

After the right calculations have been made, you can take a portion of your investment and put it into an immediate annuity. The rest of your investment is placed in a deferred fixed annuity. Both annuities are contracted for the same length of time. When a split annuity is properly constructed, the immediate annuity will deliver payments to you for a set amount of time. Once the payments stop, you then receive the deferred fixed annuity payment, which has grown to equal the original invested amount.

Simply put, you end up with the same amount of money you started with, while having received monthly paychecks all along.

So, if you have a lump sum and you can’t decide whether to spend it now or invest it later, a split annuity can allow you to do both.

And for a cherry on top, annuities provide major tax advantages on your investment. Be sure to consult with an expert to learn about how annuities provide tax-advantaged income and tax deferred growth.

The beauty of annuities is their reliability. When dealing with the proper annuities, you don’t have to cross your fingers and hope for the best because they are guaranteed. Now it’s just a matter of knowing which annuities to use and how to use them.

As always, education is the most important factor when dealing with any investment. Get to know your investment options thoroughly before making any moves. If you take the time to really learn investment strategies such as the split annuity, you will find that your hard earned savings can do a lot more for you than you ever imagined.

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About the Author

Phil Cannella is the CEO of Retirement Media Inc. He is also the Founder of First Senior Financial Group, responsible for the education and investments of those in the retirement phase to ensure a crash proof retirement. Phil Cannella hosts h... More